Procurement

Westpac: Sustainable Supply Chain Management

by Kelvin O'Connor

AusLSA Consultant

March 2015

Westpac Banking Corporation (WBC) has a well-respected reputation for operating a sustainable business and they recognise that social, ethical and environmental impacts reside as much in their supply chain as in their own activities. As such, many of AusLSA’s member firms are familiar with the WBC Sustainable Supply Chain Management (SSCM) process and the leadership position that WBC have taken to positively influence their supply chain;

WBC has recently released a suite of new online SSCM tools, which includes an on-line ‘Scoping Survey’, ‘SSCM Assessment’ and where necessary, an ‘Action Plan;

These tools replace a manual spreadsheet version which many firms may have seen before, however the process and range of questions have been significantly modified and in some respects asks a broader range of questions;

The ‘scoping survey’ asks some qualifying questions around your firms financial relationship with WBC, your financial, social and environmental ‘risks’, and some questions about ‘certified’ programs that you have in place to manage environmental, labour and WHS risks;

The scoping survey makes some decisions based on how you have answered the questions and will determine if you need to undertake the full assessment – suppliers deemed ‘low’ risk will not have to proceed;

Unless you have certified programs in place for the three areas mentioned above, it is likely that you will need to complete the full assessment;

Obtaining certification for your firm’s workforce standards and WHS is a lengthy and probably unnecessary task for a law firm however developing an environmental management plan and obtaining the AEMS certification is somewhat easier and has been specifically developed for law firms;

Don’t panic that you don’t have the more difficult certifications in place – it will be likely that you are compliant in most of the areas that are discussed in the assessment;

The online assessment comprises about 60 questions – you may find questions that you have to answer ‘no’ to – remember that the assessment has been developed for a broad range of organisations to you have to consider perspective and answer questions in a way that are relevant to the size and nature of your firm;

If you answer ‘no’ to a question, you are expected to provide an ‘Action Plan’ for that item which includes who in the firm will be responsible for that action and the associated timing, however, for some of the questions, Action Plans are OPTIONAL, so you can indicate that you will not action the item;

If you say you are not going to action an item, the tool will insert ‘We will not action this item’ – while this seems like a very negative comment, don’t worry!;

Areas where firms may find it difficult to complete questions:

Indigenous Inclusion – unless you are providing services that address the financial inclusion of Aboriginal and Torres Strait Islanders, you will probably have to answer ‘no’ to this;

Employee Health Benefits – unless you provide health insurance schemes or other financial health benefits outside mandatory superannuation you will probably also have to answer ‘no’ to this;

Contingency plans for labour rights concerns in your supply chain – law firm supply chains are not that diverse so it is unlikely that you have the resources to monitor this;

Accessibility of your products to the broader community – it is unlikely firms have products for mass consumption.

After the assessment has been submitted it is checked by the WBC SSCM team, and they do also apply perspective to the organisation answering the assessment.

AusLSA is committed to assisting our member firms become sustainable businesses and the development of our AEMS tool is the first step. We are currently considering similar programs for our supply chain and in the future we may consider certifications for other aspects of our businesses. Our relationship with WBC is strong, they recognise the certification behind the AEMS and are impressed with the strategy that our sector as a whole is embracing.

Rank a Brand is a great, simple website that assesses common, global brands for their sustainability.

Do you want to know whether to is better for the world to buy an iPhone or a Nokia, the simple school grading system gives you a quick answer which is backed up by compliance with a list of sustainable supply chain questions.

This guidance material provides information on how to include sustainable factors into the evaluation process of a Request for Proposal and provides incentives for vendors to offer more sustainable products and services to UN Development Program.

Sustainable procurement encompasses social, environmental and economic aspects and for any approach to be truly sustainable it must deal with
all three aspects.

Introduction

Members of the Australian Legal Sector Alliance (AusLSA) sign up to a set of principles which commit them to acting on the issue of sustainability.

The initial focus of AusLSA is about supporting action on the environment as the priority.

This guide therefore focuses solely on procurement as it relates to environmental issues (hereafter referred to as sustainable procurement). In particular reducing carbon emissions in the supply chain - also referred to as green procurement.

The objective of the guide is to assist firms explore how sustainability considerations should complement other key business criteria such as cost, value-for-money, and stakeholder preference. It also recognises that law firms' most significant environmental impacts are often indirect, that suppliers are a key stakeholder and that working cooperatively with suppliers on environmental sustainability often provides the best opportunity for cost, carbon emission and waste savings

Law firms come in varying sizes and many will not have dedicated procurement staff. This guide is particularly useful for firms without professional procurement departments and is intended to assist in circumstances where delegated procurement responsibility is given to individuals or other non-dedicated departments. It is intended to inform firms' existing approach to buying goods and services, not by re-designing the procurement process, but by raising issues to consider along the way.

AusLSA looks at:

What is sustainable procurement.

What the benefits are.

How to build sustainability into purchasing decisions.

The particular sustainability issues for products and services that law firms commonly buy.

These points are then illustrated in a number of practical examples, which demonstrate how you might apply sustainability principles to the purchase of a variety of products and services by highlighting key questions at each stage of the procurement process.

AusLSA does not endorse any individual suppliers to the legal industry or third party consultancies. If you have any questions about this Procurement Guide or need advice regarding a specific sustainable purchasing issue, please e-mail us.

What is sustainable procurement?

Sustainable procurement is usually defined as an approach to buying products and services that take into account the economic, environmental and social impacts of what you buy. As previously noted, this guide only deals with the environmental aspect.

Sustainable procurement ideally needs to consider the impact of the product or service on the environment over its entire life cycle from creation to disposal. Taking paper as an example, you would assess whether the paper is made from virgin pulp or a form of recycled product, the production process, how it is packaged, how it is delivered to you and whether you can recycle it.

The benefits

Taking sustainability into consideration in purchasing decisions is not merely about being seen to be green. There are many potential business benefits. Recent research reveals that more than 50% of people would prefer to work for a company with a strong environmental policy and clients are increasingly asking their legal advisers to demonstrate their green credentials. Being ahead of the game can give firms competitive advantage, but equally, as more firms build environmental considerations into the procurement process, it will drive suppliers to develop more, better and cheaper low-carbon products and services, so it really is a 'win/win' situation.

The business benefits of implementing a robust sustainable procurement strategy can be summarised as follows:

Business case for sustainable procurement

Business benefit

Reduced exposure to reputation risk

Strengthened brand, enhanced community relationships etc

Competitive advantage

Both public and private sector clients are increasingly assessing law firms on their environmental credentials

Being ahead of the game on legislative requirements to reduce carbon consumption

The relative bargaining power of the firm should be considered - it may be difficult for a relatively small law firm to capture the attention of a global software provider on this issue so we recommend prioritising resources on areas where you are more likely to achieve results and where the carbon impact of the product is likely to be high. A large supplier may be further along its green journey than your firm is and may be able to advise you on how to reduce carbon impact.

Identifying Priority Areas

Here we focus on examples of products and services that are likely to be familiar to most law firms (for example, paper or energy). However, these examples are not exhaustive, and you may find the following framework useful for prioritising other categories. We have used it to identify whether the carbon impact of each stage in the product life cycle is high or low.

Carbon usage - High or Low?

Example:
IT Consulting

Example:
Paper

Extraction of raw materials

Low

High

Design and production

Low

High

Packaging and distribution

Low

High

Use and maintenance

High (travel)

Low

Incineration and disposal

Low

High

Overall

Low

High

Once the risk of a category is established as High or Low, this can be contrasted with its volume of use within the firm, which can most easily be measured by annual spend. Firms are then likely to prioritise effort in relation to those categories sitting in the top right hand quadrant.

The Procurement Process - The four stage approach

The procurement process can be broken down into four broad stages (see diagram above). However, please note that these stages are inter-connected and should be considered flexible to suit the service in question.

Stage 1 - Identify requirement

This stage is about gathering information and defining the service required. It is vital in helping you later communicate your requirements to the prospective suppliers (the term 'suppliers' encompasses anybody providing services, goods, or both, to the customer). With reference to sustainability, this stage relates to collecting information on whether the service is exposed to environmental issues either directly or indirectly.

It is at this stage that you need to consider how important sustainability is to your firm, especially relative to the other concerns such as cost and quality of service in terms of this particular product.

There may be compromises to make but equally, good sustainability credentials should not preclude quality of service or keen pricing.

The key questions to be asked at this stage for each type of procurement supply under review are:

What are your current usage levels? Quantify the material and manpower used in the service or product and consider whether you need to maintain those usage or specification levels. Indeed, do you need the service or product at all? Often service contracts are renewed without a review of the on-going benefits to firms and their clients. This stage might reveal opportunities to improve by re-scoping the work, or packaging it more appropriately with other services.

Have you considered alternative methods?

Can the service or product be separated into different tiers? Could it be provided by an existing supplier whose approach to sustainability is already proven, which may enable the firm to achieve sustainability improvements more easily, as well as the reduced costs associated with managing fewer suppliers?

What waste is associated with the service or product and how can this be reduced? Suppliers can help here - they may be able to reduce waste (and therefore cost) by reviewing and redesigning the service, but it will need a collaborative approach.

How important is sustainability to your business, particularly in relation to the service or product in question? It may be difficult to drive through necessary changes without the broader buy-in across the firm.

Example of how to apply the key questions to paper procurement

Do you need to use so much paper? If it is still required, could you duplex document production?

As an alternative to paper production, could you move to e-filing?

Could you use differing qualities of paper for differing services (i.e. if concerned about recycled paper being lower quality, then could it be used for internal documents?)

How is the paper packaged? Could this be made more efficient and sustainable?

If clients are asking about your sustainability policies and practices, paper is likely to be a service that will be scrutinised. Do your clients have sustainable paper procurement policies in place?

Stage 2 - Develop plan for procurement

Stage 2 is where you take the information gathered in Stage 1 and set out a vision of what you want to achieve for the service or product. This will entail preparing a specification and/or guide document that can be issued to prospective suppliers (often as part of a tender process). The content should specifically address green issues and could include methods to assess the supplier's performance (i.e. how much waste material does the supplier generate? How do they measure their carbon footprint etc?) It may be useful to consider incentives to improve measurable targets.

As the suppliers are experts in their field, it is prudent to ask them exactly how they address their green issues (a simple instance of this is to ask whether they are accredited to the internationally recognised environmental management system ISO14001 or not). The size of the supplier will dictate whether this is practical or not.

The key questions to be asked at this stage are:

Ask the supplier to identify the sustainability risks associated with running its business and what it is doing to mitigate them.

Ask the supplier what it has done to 'green up' the supply chain for its products.

Ask to review the supplier's Environmental Policy and request evidence to prove that it implements the policy. Policies are a good starting point but examples of good practice not only provide evidence but also prevent wasted effort in firms and suppliers 'reinventing wheels'.

Request sustainable alternatives for products and services from the supplier in your tender.

What other information may be gathered to demonstrate the supplier's attitude to sustainability? For example, does the supplier release any type of environment reporting? If the organisation is large enough, it may have environmental certificates (e.g. ISO 14000 series). Ask if the supplier has relevant memberships in industry organisations promoting green standards for the type of supply in question. Case studies demonstrating success in this respect are valuable.

Example of how to apply the key questions to paper procurement

Is the supplier offering recycled and/or virgin source products? Can they demonstrate the advantages of each type and have they identified their sustainability risks?

How does the supplier source the energy required to produce the paper? Have they mitigated this by obtaining energy from green sources?

Has the supplier provided a clear and comprehensive sustainability policy?

Have you asked the supplier to provide information and costs on recycled and virgin source alternatives? In some instances the virgin paper may in fact have less impact on sustainability than recycled paper.

Does the supplier have ISO14001 accreditation or any other clear commitments to improve their sustainability such as awards or commendations? Do they have any examples of where they have implemented measures to reduce carbon emissions?

Stage 3 - Select

When the prospective supplier has returned its information to you based on the selection criteria developed during Stage 2, you must consider the sustainability criteria in the proposals alongside other matters. A supplier may offer 'greener' products but these may come at a premium in terms of cost. The supplier may offer to reduce its carbon footprint by reducing deliveries to your premises, but is this acceptable? Beyond the direct impacts, what does the supplier do to mitigate its own carbon footprint?

Each business will place differing emphasis on the importance of sustainability matters. The selection stage should be seen as an opportunity to confirm whether you are committed to them.

The key questions to be asked at this stage are:

How important is sustainability in your decision making process (this relates back to Stage 1 and its key question 5)? Is sustainability being given a high enough priority in your assessment of the supplier responses?

Has the supplier demonstrated credibility and an awareness of sustainability (this may be through accreditation, policies, case studies etc)?

If the supplier were to be appointed, how would it ensure that it continued to improve its sustainability credentials?

Example of how to apply the key questions to paper procurement

If the most sustainable paper option costs more than a less sustainable option, will you still commit to it?

Does the supplier's tender include comprehensive information on sustainability and do they clearly relate to their proposal to you?

Would you consider employing incentives to encourage the supplier to provide improvements to the services? Can the supplier provide evidence of continual improvement with other clients?

Stage 4 - Manage the supply arrangements

Once the supplier has been appointed, you should review the supply arrangement regularly and actively encourage the supplier to improve its green credentials. Inserting relevant Key Performance Indicators into the supply contract are an effective tool to ensure suppliers implement progressive sustainability improvements during the terms of the engagement.

Additionally, you should require that the supplier highlights any innovations it has implemented or is considering. The on-going management of the supplier should be seen as a process of continual improvement. Ideally, sustainability reporting requirements should also be incorporated into contract terms and conditions.

The key questions to be asked at this stage are:

Have you put measures in place to monitor future performance in relation to sustainability?

Are there incentives (e.g. the possibility of future work or references) for the supplier to bring innovations to you? Are you prepared to work collaboratively with the supplier to develop and implement sustainability innovations?

Is there flexibility in your agreement to allow new, more sustainable ideas to be implemented? Does the contract encourage or restrict this kind of continuous improvement?

Example of how to apply the key questions to paper procurement

Include requirements to measure the supplier's carbon footprint within your Key Performance Indicators.

To encourage the supplier to work to improve your carbon footprint, consider performance based bonuses or incentives with regard to sustainability.

Make a commitment from the outset to improve the sustainability performance as part of the contract agreement. For example, improvements in the printing processes such as reduced energy consumption, reduction in the use of hazardous chemicals or reduced waste to landfill.

Useful Links

Australia and New Zealand Government Framework for Sustainable Procurement

Glossary

Sustainable procurement
An approach to buying products and services that takes into account the economic, environmental and social impacts. It covers everything from asking suppliers for information on their environmental management system to requesting details on the energy, water and carbon pollution associated with a specific product or service.

Virgin materials
Materials which have not been previously used as opposed to recycled materials.

Whole life cost
Calculation of all the costs that will be incurred during the lifetime of the product or service including transportation, water and energy use, maintenance and disposal.

This document is largely based on the procurement resources developed by the Legal Sector Alliance of England and Wales. AusLSA would like to thank the LSA-UK for sharing this resource and allowing AusLSA to adapt it for the Australian market.

Procurement Guide: Catering

Issues

Understanding your firms catering needs and how best to manage the supply of catering services.

We only have a finite supply of food available to us so it is important to know that we are using sustainable food supplies as much as possible.

Food supplies can be transported to us as close as the local market down the road or they can be flown or shipped in from interstate or overseas. It is important to be aware of the carbon emissions involved in the transport of your food supplies.

How is your food packaged when received?

Food wastage is a global issue, especially within the corporate sector. Are you doing everything you can to minimise your food wastage and therefore managing your catering spend better?

Considerations

Identify Requirement

We will always have a need to provide catering for our staff and clients, be it internally or outsourced. Do you have a centralised and controlled method of ordering your catering or is this decentralised within your firm?

Do you have the appropriate kitchen facilities on-site to prepare and cook your own food using internal chefs / cooks or do you have to rely on outsourced providers for some or all of your catering needs?

Do you rely on various suppliers or do you have national / international contracts as part of your procurement management?

Plan

Like many areas within an office environment, if not managed properly catering can easily be a source of excessive expenditure. It is best to appoint a key person(s) to oversee and coordinate the catering procurement - this may be a Catering Manager or somebody within your catering area but could also be a Receptionist or a central secretary / administrative role. If you have many different people ordering their own catering then this is very inefficient in controlling cost, quality and quantity.

Set up simple grounds rules for your catering procurement. Centralise your ordering if possible. Set realistic budgets for catering expenditure for each team or department. Ensure meetings are not held unnecessarily in the early morning or at lunch times so that you can manage the expectation of providing staff with a 'free feed'. Ask staff to bring their own food if necessary.

Make sure you are providing the right quality of food to match the occasion. Your morning tea for staff should be basic catering (which will maintain costs) whereby if you are trying to impress clients then consider more appropriate food quality and cost.

If planning an event then allow for a slight drop off in numbers so that you don’t over cater.

Consider 'donating' any left over food to organisations such as SecondBite. SecondBite help identify opportunities of collecting surplus fresh food and produce and facilitate its safe and timely collection and distribution to agencies and people in need.

Select

Review your current suppliers and be prepared to ask them questions about their food supply chain - then be prepared to make decisions based on the following criteria;

is it locally sourced? This reduces carbon emissions and supports local businesses

is it seasonal? Many foods are now produced all year round which means the use of heating and cooling methods which increases carbon emissions

is the food sustainably caught? For example certain fish stocks are now very low globally. Try and use certified fishing practices such as the Marine Stewardship Council (MSC)

is the food GM free? All organic foods are GM free.

how is the food packaged when supplied? Is the packaging bio-degradable

Consider purchasing the following;

Fair Trade goods

Organic food or food from good farm management practices

Free range poultry and eggs

Manage

Ask your suppliers questions and make decisions based on their answers - don’t be afraid to challenge or change your suppliers if you feel this is necessary.

Manage your food waste proactively - the best way to manage waste is to avoid having any in the first place

Small steps - change can take time so be patient

Communicate and promote any changes to staff and highlight the reasons why the changes were made. Seek any feedback from them also.

Procurement Guide: Records Management

Issues

Despite the various systems and technologies available, the legal sector is still a heavy consumer of paper. It is clear that we are still being challenged by achieving a 'paperless office'.

Poor records management also means poor risk management.

Generally inefficient record managing practices come from a bad culture or lack of policy adherence - or both.

Considerations

Identify Requirement

Undertake a full review of how your office manages its records.

Are you using electronic file management systems and smart technology to minimise paper consumption?

Are your RM processes centralised or spread out amongst different parts of your firm?

Is there full control and tracking of a file from its creation to destruction?

Do you have a standard filing system in place or are there various methods used throughout your firm locally and / or nationally?

Are there clear policies in place to manage your records effectively and if so are they being adhered to?

Plan

Changing an inefficient RM culture can be very challenging but it is not impossible. It may end up being a slow process but the change will benefit your Partners and staff, your clients, it will improve your risk management processes, improve utilisation of your office space and will ultimately save your firm money and have a positive impact on the environment.

Seek support from management as their buy-in is critical.

Be prepared to communicate openly to staff and clearly explain the benefits of the changes and the reasons why they are happening.

Select

File Management process - implement a national standard so that everybody is using the same filing method (eg lateral filing, lever arch etc) and make sure everybody is clear about what can be filed electronically or needs to be printed. Re-use your files where possible which reduces cost and landfill.

Technology - use your office technology to support your RM policies and processes. Invest in databases to electronically store your correspondence / emails / documents etc and only print off what is needed. Set your printing devices to default to double sided printing and explore a secure or follow-me-print option to reduce unclaimed printing waste.

Set up your mailroom to scan all incoming mail and send on electronically. Reduce the paperwork trial by making invoices / approvals and office forms (such as timesheets, leave forms etc) electronically available.

Review all hard copy publications, magazines, reference materials that individuals receive and see if (a) these are still needed and (b) if so arrange for them to be received electronically if possible. You will find that many staff don’t even read the hard copy publications that they currently receive.

Look at other alternatives to reduce the need for hard copy files being produced. For example, iPads and other similar devices can be uploaded with files and presentations and taken to client offices instead of hard copy files. Provide reports, training and firm materials to clients electronically or on a USB.

Off-site storage - be smart with the file retrieval management of your off-site storage. The more regularly files are retrieved the more retrieval fees you will pay and the more emissions are produced by courier vans.

Office storage space - minimise how much physical shelving space staff have individually or in team environments. Force staff to think about what they really need to print out and encourage electronic filing instead.

Manage

Promote the good work that is achieved within your firm by individuals and teams, show others that being more efficient with managing their records is achievable.

Calculate the paper used per person each year within your firm and stack this up in reams to show each person their true impact. Once improvements are made in managing your records then this will show with reduced paper usage. Communicate the changes and demonstrate to staff the reduced reams per person and highlight the environmental benefits achieved.

There are true financial savings to be made in improving the management of your records in areas such as reduced paper and printing costs, time efficiencies, reduced amount of paper records being created if stored electronically, reduced storage needs within your office and also less to store (and later destroy) in your off-site storage facility and standardising your filing system will give you procurement cost efficiencies. Track and report on these savings to management.

Remember that a 'paperless office' is not a 'paper free office' - be realistic with your expectations.